China’s Favorite Chicken

By July 2013, KEF has 4,400 restaurants in 850 cities and the company plans to open another 700 by the end of the year. In this paper there we offer an analysis of the success of the company, which are the factors that have contributed to Cuff's overwhelming and somewhat unexpected success in China. First, we will describe the company's story and how it has penetrated Chinese market, and then we will analyze why it is important for companies to understand a different culture when expanding to a new market, and studying how has been the Cuff's localization strategy, the key for its success.

Colonel Sanders is an icon of American brand KEF (Kentucky Fried Chicken). However, the owner company, Yum! Brands, generates more sales in China, the most populous country in the world, than in the United States. Yum! Brands, which also owns Pizza Hut and Taco Bell, could be a model for other multinationals who are attracted by the huge growth potential offered by China. In fact, it is this country along with other international markets who currently drive sales and profits Yum.By July 2013, KEF has 4,400 restaurants in 850 cities and the company plans to open another 700 by the end of the year.

Actually, it has been opening one new store every cay. Counting local Plaza Hut, Yum NAS more tan 6 restaurants. Chain expects its earnings in China and other international markets represent 75% of your total earnings. An amazing feat, because foreign markets report its rival McDonald's 56% of their total earnings.

Obviously, China is a market that nobody can ignore despite the political, cultural and geographical challenges involved.But how it has achieved this American multinational? A multitude of factors have contributed to Cuff's overwhelming and somewhat unexpected success in China. These factors include fortuitous timing played out against an exciting and dynamic market background enabled by China's economic reforms, the strength and stability of Cuff's leadership team, strong organizational implementation capabilities, and a number of localized strategic initiatives. 1 . HISTORY Harlan Sanders, a man of U.

S. Rigging, started the fried chicken business in 1952. He traveled the country from restaurant to restaurant and developed a franchise system whereby selling his secret recipe to restaurants that commit to follow it strictly. This is how the business of Colonel Sanders, as he is known, began to become a major fast DOD chain "Kentucky Fried Chicken". KEF now plays an important role in the world as far as fast food is concerned.

And it is in China where he obtained his greatest triumph, covering over 40% of the fast food market.However, this victory was costly. In 1973, when KEF first entered Hong Kong, it misjudged the local market and failed to develop a suitable business model. By 1975, all 11 restaurants were forced to close their shutters. Fortunately, KEF learned its lesson.

This costly experience served the company in an invaluable way to prepare itself, and then successfully enter the Chinese market in 1987. That year KEF opened its first store in Attainment Square, Beijing. Later, in 1990, Pizza Hut was also introduced in China. 2.UNDERSTANDING CHINESE CULTURE When any international company wants to enter to China, it is needed to understand Chinese culture, like a frame of the place where they want to take their operations. What is successful in America is not necessarily successful in Asia.

Thus, previously studying the Chinese culture will give the foreign companies some knowledge and some tools to use for their marketing plans and business strategies. China is one of the few countries in the world where McDonald's is not the dominant Hahn in the world of western food. And that's not by accident.The imminent success of KEF in the Asian giant can be attributed mainly to the proper understanding and evaluation AT ten cultural context. Kendall, as it is called in China, is more than a company.

It represents a foray into Eastern thought and at the same time a good exchange between Chinese and American culture. 2. 1 . The need to manage the business from local It's hard to run a business in China from outside the country, and many of the biggest multinational companies ensure that the success is based on, from the beginning, having Chinese managers.

These are the ones who obviously handle customer culture. It is essential to find the best Chinese talent and associates. Recruiting and training the best local professionals help companies to better understand their customers. What happened in China with Yum! Brands, and with KEF in particular, had a lot to do with China division chairman and CEO Sam Us.

"He really flexed the model," says a case study written by Harvard professor David Bell and Agribusiness Program director Mary Shellac. This was in part due to KEF being owned by PepsiCo when it first came to China.PepsiCo was not a fast-food company, so Us was given more managerial freedom. Along with being lucky, Us is smart, driven, and visionary”a classic entrepreneur. But he's also humble.

"There's no room for ego," Us explained in the case. "China doesn't have the same culture of individualism that is present in the United States. " Sue strategy was that KEF "would not be seen as a foreign presence but as part of the local community..

. Our opportunity was to take the best ideas from the US fast- food model and adapt them to serve the needs of the Chinese consumer".In a period in which the Joint-ventures were the only viable way to enter the Chinese arrest, and being aware of the role that the state in Chinese society and the need for "Guiana[l]", KEF executives selected local government connections and established partnerships with local companies. This allowed the company to capitalize on the experience of local businesses and offer a variety of regional dishes that appealed to local tastes. KEF established a relationship of mutual trust with both partners as with local managers and virtually delegated the Chinese team decision making.Another factor that has definitely influenced this success story is its management am, specifically the founding team, known as "The Taiwan Gang" because most of its members are from Taiwan.

This pioneer team members have extensive international experience, both academically and labor, and a deep understanding of Chinese culture. Those professionals developed a global mindset, who intuitively found opportunities in a culturally diverse market and who understood the importance of developing a local strategy within a global company. 2 essences consumers appreciate equal KEF operations in China was also benefited factors beyond their control. For example, he high cost of business in China made KEF products too expensive during the beginning. But high costs were associated with high quality and because it was an American brand, and Chinese consumers appreciate quality products and are willing to pay more for them, so KEF became popular in China. The American fast food chain has established itself as a "luxury' fast-food among Chinese consumers, largely in foil to McDonald's.

According to Forbes Magazine, KEF foods occupy the premium market segment, meaning that it is somewhere in the range of double to triple the prices of local restaurants with similar menu offerings. For example, a chicken thigh and a chicken wing are about ARM 8. 5 and ARM 4 at KEF, but only ARM 4 and ARM 3 at Country Style Cooking Restaurant Chain, a KEF knock-off. Cuff's claim to the premium segment lies in its environment - it's clean, spacious, well-lit and, at least by Chinese restaurant standards, well appointed. But luxury comes with a price tag.

An average meal there costs about ARM 25 per head, placing KEF in the premium fast-food segment of the industry, not in consumer staple but discretionary spending category. Given the pleasant dine-in atmosphere and nutritious and safe image it has created, locals are happy to pay for it. But all this could change especially as the economy is cooling down. Nowadays main appeal are coupons.

These vouchers with special offers and discounts are very important to most Chinese consumers. About half of customers of KEF and its main competitors use discount coupons, and it seems to be that KEF offers better deals than McDonald's. . LOCALIZATION Localization of language, product attributes, advertising content, and even product meanings is a common practice adopted by multinational companies in most transitional economies, including China. Advertising is one visible aspect of the ultra of consumption and and understanding of host culture are critical elements in a firm's international marketing strategy.

When China was opening up to the world in the late sass, Chinese customers at KEF restaurants were eager to experience Western lifestyles for the first time.In the initial period of Cuff's entry into China market, few of Chinese consumers were really impressed with the food itself. Instead, they were more fascinated with the eating experience: the encounter with friendly employees, quick service, spotless floors climate-controlled and brightly-lit dining areas, and smiling Colonel Sanders standing n front of the main gate. Having experienced the initial surprises brought by a never-seen western lifestyle, essences consumers nave gradually calmed clown Ana toner consumption tattletales towards foreign products are getting more reasonable.As a country with the best culinary culture in the world, China was a big challenge for Cuff's efforts to cater to the captious palate of Chinese consumers. In the last few years, Yum has increasingly devised products and services specifically for local consumers.

This strategy has had problems as well as opportunities. One of the problems has been the location of the restaurants. Normally they were originally located in centers of high traffic. At the same time, KEF was once highly desirable in shopping malls because it drove traffic. Commercial landlords offered KEF a discounted rent and 5- to 1 5-year rental lock-up contracts.Now there is more competition and consumers behavior is changing, especially due to E-commerce growth.

To compensate for the declining store traffic in 2012, KEF responded with new offerings of value combos to go, free delivery services and no tipping. In terms of atmosphere, usually KEF restaurants on the second floor are decorated eke the hutting (traditional Beijing neighborhoods that today are disappearing to make way for high-rise office and apartment buildings), while the third floor functions as a gallery for local photographers and painters. 3. 1 .Some cultural aspects In his book "KEF in China: Secret Recipe for Success", Warren Lie says that to succeed in the Chinese market need to have a deep understanding of China and its cultural context, to understand Chinese people and their feelings of love and hate westward understand Chinese history, language, the influence of Confucianism, Buddhism and Taoism. Like many fast food restaurants in the West often organize children's birthday parties, KEF in Rummy, capital of Jagging Autonomous Region, home to Muslim Shrugs, organizes parties for families of children who have Just undergone the religious ritual of circumcision.

. 2. Health is important for Chinese A very good example of "localization" of KEF has been the marketing efforts they have done by converting the concept of fast food to a "healthy' way. For Chinese consumers, health is directly related to diet. Traditional Chinese medicine has long recognized a relationship between food and overall well-being, ND specific foods will often be recommended as part of the treatment for certain disorders. The traditional Chinese diet is a healthy one.

Advertisement campaigns may have convinced people that KEF is more healthy in canal tan America.I Nell message Is Nat t In canal Is ten "new Taste T healthier than other fast food options abroad and in China. According to the campaign, KEF has established a food health inquiry committee, continuously added new menu selections, adjusted the flavor of its food to the tastes of Chinese consumers, strengthened the dissemination of scientific education about food & average nutrition, encouraged the young to participate in physical activities, and has attained a noticeable achievement in promoting a healthy food policy.Recently KEF has sublimated its overall experiences and learning in China, breaking through the "traditional Western fast food" model and beginning the "New Fast Food" movement as its future guiding principle to face the needs of the Chinese market. KEF is willing to be the first to create a "New Fast Food" that matches the needs of human kind, and fits in with the national character of China. This initiative was developed by Us in 2005 in response to concerns about the role of sat-food restaurants in the obesity epidemic concerns that he shares and takes responsibility for.

We have been too greedy, too shortsighted," says Us in the Harvard case study, referring to the traditional high- volume, low-choice fast-food model. Us believes that offering a wide variety of foods will help people to make healthier choices. KEF restaurants in China have limited the amount of money saved on combo meals, and have completely eliminated supervised items. Exercise is actively promoted inside the chain; as of 2010 the youth programs and competition it sponsored had over 260,000 participants in 438 cities.To represent the Chinese characteristics and increase the identification from Chinese consumers, KEF absorbs Chinese cultural elements into the arrangements and decorations of its outlets all over China.

In 2003, KEF spent 7. 6 million ARM to redecorate the flagship outlet in Beijing, which is also the world's largest KEF outlet, with the Great Wall, shadowing, Chinese kites and other traditional Chinese symbols. In the Chinese New Year of 2003, all the statues of Colonel Sanders in KEF outlets in China were put on the Chinese traditional suits which are known as "Tang suits". . 3. Food for Chinese Consumers One of the reasons why KEF has been more successful than McDonald's in China is that the fried chicken is much more acceptable to the Chinese palate of other American fast food such as hamburgers.

But KEF would not be as successful if it had not changed its menu to the Asian population taste. Yum knows the importance of culturally knowing Chinese market and to work in locating products. And Just one of the secrets of success of KEF in China is the flexibility of the company to adapt their supply of food. Menu In canal Includes a small under AT Items would De Tambala to western suitors (like mashed potatoes, corn on the cob, fried bone-in chicken) but most would not.

Most are native Chinese dishes that customers would not recognize in the U. S. The Chinese KEF menu may include fried dough sticks, egg tarts, shrimp burgers, and symbolism drinks, as well as foods tailored to the tastes of specific regions within China. The list goes on: traditional Peking chicken rolls, preserved Chuan pickle and Shredded Pork Soup, Happy French Fry Shakes (with beef, orange and Augury barbecue spices) and for breakfast a Chinese-style porridge called conge.In KEF it is also very common to find special dishes of China themed names, such as "The Dragon Twister" -a chicken wrap on a Peking duck-type sauce- alluding to the legend that name. The large selection of menu items is meant to appeal to the Chinese style of eating, in which groups of people share several dishes.

"In addition to Original Recipe chicken, KEF has an extensive menu featuring beef, seafood, rice dishes, fresh vegetables, soups, breakfast, desserts, and other products that appeal to Chinese consumers' tastes", states KEF China's website. The other brand of Yum, Pizza Hut, includes several dishes with rice.It had to remove from its Chinese menu some options that are famous around the world, such as the salad bar, unlimited buffet of salads, as the Chinese people enjoyed to use the free salad to make sculptures for displaying at photos through social networks. This was a waste of food for the chain.